Crude oil, gasoline stockpiles drop

NEW YORK (AP) — The nation’s crude oil and gasoline supplies shrank last week, the government said Wednesday.

Crude supplies dropped by 5.2 million barrels, or 1.5 percent, to 349.8 million barrels, which is 1.5 percent below year-ago levels, the Energy Department’s Energy Information Administration said in its weekly report.

Analysts expected an increase of 1.8 million barrels for the week ended Aug. 5, according to Platts, the energy information arm of McGraw-Hill Cos.

Gasoline supplies fell by 1.6 million barrels, or 0.7 percent, to 213.6 million barrels. That was a bigger drop than analysts expected and 4.4 percent below year-ago levels.

Demand for gasoline over the four weeks ended Aug. 5 was 3.4 percent lower than a year earlier, averaging 9.1 million barrels a day.

U.S. refineries ran at 90 percent of total capacity on average, up 0.7 percentage point from the prior week. Analysts expected capacity to slip to 88.5 percent.

From CCN Money:

Washington has a compromise problem. And now, lawmakers face a seemingly impossible task — find a way to institute reforms that have eluded policymakers, all while markets and rating agencies watch with rapt attention.

After risking default, the nation’s lawmakers agreed last week on a plan to raise the debt ceiling.

The deal slashed spending. But it included no tax hikes and no entitlement reforms — items that virtually every budget expert says are needed.

Those tough choices were kicked down to a 12-member bipartisan super committee tasked with finding another $1.5 trillion in budget savings.

“What we need to do now is combine those spending cuts with two additional steps: tax reform that will ask those who can afford it to pay their fair share and modest adjustments to health care programs like Medicare,” President Obama said this week.

That sounds easy enough — but it will actually require mountains of political will and lawmakers who are willing to risk their jobs.

“There is no question about the political backlash they will face,” said Julian Zelizer, a professor of history and public affairs at Princeton University. “There are a lot of reasons to be skeptical.”

Read here:

“We don’t have clarity,” says Chicago-based bond trader Jeff Kilburg, the Sr. Development Director of Treasurycurve.com. “The market wants clarity and they want it now.”

On the one hand, Kilburg says we have been given an unprecedented degree of clarity from the Fed in terms of its new low rate forecast for the next two years, but on the other hand is the harsh economic reality that outlook portends, as well as the Fed’s inability to do anything about it. “It’s not 2008. Ben Bernanke is not rolling down the street in that tactical hummer with every weapon in his aresenal. He’s more or less rolling in a mini van right now,” Kilburg quips.

With nearly 15 years of experience trading Treasuries, Kilburg is now more than ever looking to the bond market for leadership and to relinquish all notions on falling yields. “We had this exact conversation when the 10-year treasury came down to 3%. Now we just went down to 2%. Rewind back to April and the 10-year was at 3.75%,” he points out.

So are Treasuries are telling us we’re in a recession?

“I think we are, no doubt about it,” says this former Notre Dame football player. “You can call it whatever you want… but I think we are actually bottoming out in the Treasury market…but I think we are going to see continued chaos…and I’m just hoping we get through this quickly.”

Instead of another full blow round of QE3, Kilburg says we will likely get “QE 2-and-a-half” which would see the Fed holding on to its recently acquired $1.5 trillion of Treasuries a lot longer then anticipated.

“Yesterday, the bulls put the flag on the front lawn and claimed victory. I don’t know if it’s as much of a bull victory as much as it is a technical bounce.”

Will forecasts for recession here and growing problems in Europe continue to fuel the flight to safety? Will you buy Treasuries with even lower yields? Let us know your thoughts below.

SINGAPORE (AP) — Asia batted away the global recession sparked by the 2008 financial crisis. Fending off the latest wave of market turmoil may prove tougher.

World stocks were pummeled this week by the first-ever downgrade of the U.S. credit rating and evidence of stalling recoveries in the U.S. and Europe that could weaken demand for Asia’s exports of cars, gadgets, clothing and other goods.

Normally that would have Asian governments turning to interest rate cuts and extra spending but their options are constrained by inflation that has remained stubbornly high despite efforts to tame it.

The dilemma: Give economies too much of a boost and the high inflation that is undermining gains in living standards will become even more troublesome. Press ahead with the yearlong campaign to bring inflation down and risk a sharp decline in economic growth just as the U.S., the world’s biggest economy, teeters on the edge of another recession.

Singapore, heavily reliant on the spending power of U.S. consumers, was Wednesday among the first to acknowledge the increased risks, lowering its economic growth forecast for this year.

“It’s a tough balance, but inflation in Asia is going to keep the pressure on policymakers,” said Neeraj Seth, an executive at BlackRock, which manages $3.7 trillion of assets.

China, Asia’s largest economy, may have to sacrifice some of the breakneck growth it’s enjoyed over the last decade to get inflation under control. Consumer prices jumped 6.5 percent in July, a three-year high, while the economy expanded a roaring 9.5 percent in the second quarter.

China has raised interest rates five times since October and curbed lending and investment, but the government admits it probably won’t be enough to slow inflation to its 2011 target of 4 percent.

“The problem is still that growth is too fast and inflation is too high and going up,” said David Carbon, head of Asia research at DBS, Southeast Asia’s largest bank.

Quickening inflation threatens to swell the ranks of people in countries such as China, India and Vietnam already living below the poverty line. Vietnam has the region’s highest annual inflation rate at 21 percent while India’s is 8.6 percent. Rapid rises in prices, especially for food, are a threat to social stability, which in the past decade has been underpinned by the rising living standards that Asia’s robust economic growth has delivered.

The Asian Development Bank estimates that a 10 percent increase in food prices drags another 64 million people below the $1.25 a day poverty line. A 20 percent increase in prices pushes up the number in poverty by 129 million.

“Everything is getting much more expensive, but I’m not getting an increase in my salary. I have to dig into my savings,” said high school teacher Nguyen Bich Lien, 53, as she bought vegetables at a market in Vietnam’s capital Hanoi.

“It costs me 400,000 dong to 500,000 dong ($19 to $24) for one day of shopping, I feel like my money was stolen.”

“When my savings are all spent, then I will have to eat less meat and more vegetables,” she said, adding she earns 8 million dong a month as the breadwinner of her family because her husband is too sick to work.

“I can imagine how much harder low-income workers and farmers have to struggle to make ends meet,” she said.

Despite my temporary need to murder Jim Cramer yesterday, because of his opinion of oil markets, it needs to be said; Jim Cramer has been nailing it with his commentary recently. The man is on fire, and I applaud him for it.

How much damage was done by the budget disaster in our country? How much damage could a collapse of the euro and the banks in the euro states do to the world’s economies?

Those two albatrosses could reverse any rally, stop any bull in its tracks. We are all trying to figure out how much impact these have had and could have. Does an ineffectual president and a fractious congress equal a 1% decline in GDP from levels that were low already? If Italy goes bust, does that mean we go into a second recession?

You have to visualize these crimes against the economy on a calm day, because on a down day they both seem unfathomable and on an up day they can seem trivial.

I think the dysfunction in the U.S. was a huge wake-up call to the world that, right now, we are politically bankrupt. The Standard & Poor’s downgrade crystallized what most are unwilling to say, which is that until our president loses in the election, which I don’t think he will, or the Tea Party obstructionist anarchists fall by the wayside, we can’t really have an economic recovery of any sort in this country.

That’s what so much of the earlier part of the decline was about. We won’t take the tough measures and our president is anti-capital and pro-labor. That others won’t say this is really a function of cowardice, because it’s all anybody talks about when you get off the desk or you turn the microphones off. The duplicity of so much of the media is frightening, because I don’t know a Republican or a Democrat who supports this president when it comes to economic issues. The leadership vacuum is palpable to all, but those in front of cameras fear retribution. I don’t blame them. The lash awaits.

Europe? More difficult. Of late, there’s a new school developing that is trying to put the 2008 moment for Europe in perspective. The prevailing wisdom is that the destruction of a currency plus several major bond markets plus many major banks just equals another Great Depression, maybe worse than what happened here.

You can find his complete interview here.

It is beginning to feel a lot like 2008 all over again. But it’s not the same.

As markets tumble – the Dow Jones industrial average fell 5.6 percent on Monday – it is instructive to hear from someone who knows a thing or two about a financial crisis: Henry M. Paulson Jr., the former Treasury secretary.

And he turns out to be more sanguine about the United States, after the Standard & Poor’s downgrade, than some other voices being heard amid the tumult.

“While the players in Washington certainly haven’t performed at AAA level, I would certainly take U.S. Treasuries over other AAA sovereigns any day,” Mr. Paulson told me.

Yes, there has been much hue and cry over S.&P.’s cut in the credit rating of the United States. But the credit rating downgrade almost seems like a bad joke considering what happened in the bond market: Treasuries rallied as yields fell on Monday to their lowest levels since 2009. In other words, investors felt Treasuries were a safer – yes, safer – bet after S.&P. downgraded them than they were before. (What does that say about S.& P.’s credibility in the bond market?)

The downgrade may point up the enormous challenges facing the country – persistent unemployment and the possibility of slower economic growth is a hard truth that may ultimately force the cost of borrowing to rise for the nation over the long term.

But the downgrade is almost a sideshow compared with the real reason that stocks started falling Monday morning, before panic set in and the momentum of the market took over: the intractable problems in the European Union, which look a lot more like the United States banking crisis circa 2008 than what’s happening on this side of the Atlantic now.

Pretend for a moment that countries like Greece, Spain and Italy are our banks in 2008. They are close to insolvent. (And the actual banks in Germany, Britain and France that are supposed to be strong are horribly undercapitalized and are holding too much debt from countries like Greece, Spain and Italy – all countries that truly may not be able to pay it back in full.)

As Mr. Paulson told me, “The most pressing and significant problems in the global economy are unsustainable structural issues with regard to the E.U. – fiscal deficits and the structure of the E.U. itself.”

This story might not grab as much attention, but it is this plight that is manifesting itself in the market.

Despite the credit downgrade, lower treasury yields pressed mortgage rates lower.

At least one fear was not realized amid Monday’s meltdown: the concern that mortgage rates would immediately shoot higher in response to Standard & Poor’s downgrade of Fannie Mae and Freddie Mac, the government-sponsored entities that are the 800-pound gorillas of the mortgage market.

In fact, the initial response to Fannie and Freddie getting cut to AA+ from AAA was precisely the opposite. Mortgage rates were poised to continue declining.

HSH Associates, which surveys lenders, quoted the average 30-year fixed rate mortgage at 4.44% Monday. “We expect to see rates go into the 4.30’s by noon tomorrow,” said Keith Gumbinger, of HSH Associates.

Mortgage rates are set off of the interest rates on U.S. Treasury notes and bonds. Even though Standard & Poor’s pulled its AAA rating of the United States Friday night, investors still rushed into U.S. Treasury securities Monday as a safe haven, believing more in the “full faith and credit of the United States” than in the opinion of Standard & Poor’s credit analysts. As investors snapped up Treasury notes and bonds they pushed down interest rates on those securities, which move inversely to prices.

Late Monday afternoon, the 10-year Treasury note traded at a yield of 2.34%, down from 2.56% on Friday and 3% just two weeks ago, a huge move. That 10-year yield is the benchmark used to set 30-year fixed mortgages.

“The flight to quality effect is dominating,” said Walt Schmidt, senior vice president of FTN Financial Capital Markets. “The net effect is lower mortgage rates.”

Read here:

Any glimmer of hope that the housing market will stage a recovery in the upcoming months has vanished, thanks to the recent spate of bad economic news that has been making headlines over the past several weeks.

According to the latest analysis of home price trends in 384 markets based on the Fiserv/Case-Shiller Indexes, it will be well into the first quarter of 2013 before median home prices across the nation will even be on par with prices from the first quarter of this year.

And that’s not saying much. During the first quarter of 2011, prices fell in 302 of the 384 housing markets tracked by the Fiserv/Case-Shiller index, dropping by an average of 5.1% year-over-year.

As a result of continued weakness on the jobs front and the debt ceiling fiasco, Fiserv pushed back its projections of a housing market turnaround by three months. Now, it doesn’t expect home prices to start gaining any ground until the second quarter of 2012.

Instead, Fiserv expects median home prices to continue to fall by an average of 3.1% between March 31 of this year and March 31, 2012. After that, it expects to see prices increase by 2.7% until the first quarter of 2013.

Read Here:

Moody’s Investors Service explained Monday why it was sticking with its triple-A bond rating and negative outlook for the United States, setting itself apart from Standard & Poor’s, which downgraded the U.S. last week.

Moody’s said it expects the economy will improve and additional measures to reduce the budget deficit will be in place by 2013. The rating agency said this is why it reiterated its AAA rating for U.S. debt on Aug. 2, when the Senate agreed on a 10-year plan to reduce the deficit by more than $2 trillion.

But Moody’s said that its negative outlook, which it also assigned on Aug. 2, was due to political squabbling in Washington — the biggest potential threat to the bond rating.

“We expect the economic recovery will continue and additional budget deficit reduction initiatives will be put in place by 2013,” said Moody’s, in its report on Monday. “The political parties now appear to share similar deficit reduction objectives.”

But Moody’s also said, “However, the disagreement between the two parties over the means by which to achieve deficit reduction and the difficulties experienced in reaching a compromise on raising the debt ceiling highlight the risks of political polarization. This uncertainty is among the drivers of our negative outlook.”

Moody’s released this explainer three days after S&P downgraded the credit rating of the United States on Friday. S&P said that it wasn’t enough for lawmakers on both sides of the aisle to agree to raise the debt ceiling — that the U.S. also needed a “credible” plan to tackle long-term debt.

ATHENS, Greece (AP) — Greece on Monday banned short selling on the stock market for two months, after shares on the Athens Stock Exchange plunged to their lowest level in more than 14 years as financial markets were buffeted by worries over the U.S. economy following a downgrade of the country’s debt.

The bourse’s general index sank below the 1,000-point mark, closing down 6 percent at 998.24 — the lowest level since January 1997. Less than an hour after the stock exchange closed, the Capital Market Commission imposed the two-month ban on short-selling, which comes into effect as of Tuesday.

Short selling, a way of betting a financial asset will fall in price, typically involves traders selling borrowed shares in the hope of buying them cheaper later and profiting on the difference.

The commission said in a statement it took the decision “after taking into account the exceptional circumstances prevailing in the Greek market.”

It had imposed another two-month suspension of short-selling in April 2010, after a six day losing streak on the stock exchange. That ban had followed a downgrade of Greece’s credit rating.

Greece became the first EU country to seek an international bailout last year, when it saw its borrowing costs spiral out of control as investors doubted it could repay its debts. International creditors agreed last month to extend it a second bailout.

Read here:

Carlos Slim, the world’s richest man, lost about $8 billion this week.

The Mexican billionaire’s stock portfolio, measured in U.S. dollars, has dropped about 11 percent since July 29, before today, and is valued at about $63 billion, according to data compiled by Bloomberg. That compares with a 7.1 percent slide in the Standard & Poor’s 500 Index.

Slim, 71, has taken a hit as Mexico’s benchmark IPC index dropped 7.4 percent and the peso slid 2.5 percent against the dollar on concerns that the flagging U.S. economy will hurt demand for assets in its southern neighbor. The removal of three of Slim’s companies from the IPC index has made matters worse for the billionaire.

“He’s been particularly hurt by those companies leaving the IPC,” said Leon Cabrera, a trader at Mexico City-based Vanguardia Casa de Bolsa. “It reflects the nervousness out there. It’s part of being in the market.”

WASHINGTON (Reuters) – The U.S. Postal Service posted a net loss of $3.1 billion in its third quarter and warned again it would default on payments to the federal government if Congress did not step in.

Total mail volume for the quarter that ended June 30 fell to 39.8 billion pieces, a 2.6 percent drop from the same period a year earlier, as consumers turn to email and pay bills online.

The mail carrier, which does not get taxpayer funds, has struggled to overhaul its business as mail volumes fall. It has said personnel costs weigh heavily and is facing a massive retiree health benefit prepayment next month.

“We are experiencing a severe cash crisis and are unable to continue to maintain the aggressive prepayment schedule,” Joseph Corbett, the agency’s chief financial officer, said in a statement.

“Without changes in the law, the Postal Service will be unable to make the $5.5 billion mandated prepayment due in September.”

Congress, which last week ended a vitriolic debate about the U.S. government’s debt levels and budget deficit, is now in recess until early September.

USPS cut work hours during the quarter by 3.1 percent compared to the previous year, when quarterly net losses were $3.5 billion.

The Postal Service said it lost $5.7 billion during the nine-month period ended June 30, compared to $5.4 billion in the same period of 2010.

In its fourth straight year of declines, the agency had a net loss of $8.5 billion for the 2010 fiscal year.

A friend of mine contacted me earlier to let me know that Italy has raided Moody’s and S&P. He posted the link to my wall; I’ve included it below.

I’m sure this will do wonders to their credibility.

MILAN, Aug 4 (Reuters) – Italian prosecutors have seized documents at the offices of rating agencies Moody’s and Standard & Poor’s in a probe over suspected “anomalous” fluctuations in Italian share prices, a prosecutor said on Thursday.

The measure is aimed at “verifying whether these agencies respect regulations as they carry out their work,” Carlo Maria Capistro, who heads the prosecutors’ office in the southern town of Trani which is leading the probe, told Reuters.

The documents were seized at the Milan offices of the two agencies on Wednesday, he said, adding that prosecutors had also asked Italian market regulator Consob to provide documents relating to their registration in Italy.

S&P in Italy said in a statement it believed the probe was “groundless.”

“We strongly defend our work, our reputation and that of our analysts,” it said.

Moody’s said it “takes its responsibilities surrounding the dissemination of market sensitive information very seriously and is cooperating with the authorities.”

The Trani prosecutors have opened two probes — one for each rating agency — after a complaint by two consumer groups over the impact of their reports about Italy on Milan stock prices.

The first complaint was filed against Moody’s after it published a report in May 2010 about the risk of contagion for Italian banks from the Greek crisis.

A second complaint filed in May this year targeted Standard & Poor’s after it threatened to downgrade Italy’s credit rating because of its huge public debt.

The prosecutors are also investigating whether any crimes were committed during a sell-off in Italian assets on July 8 and July 11 as fears spread that the euro zone’s third largest economy is being sucked into the widening debt crisis.

One of the consumer groups behind the complaints said the probe was aimed at finding out whether the market’s sharp drop was due to a “precise scheme by hedge funds and other unidentified players that could be linked to the negative comments about Italian public finances by the rating agencies.”

Consob last month summoned Moody’s and S&P for meetings and urged them not to release their statements during market hours.

Cameco has reported earnings and did a breakdown of their anticipation of the uranium market.

I’ll just post this first, as it’s what likely interests everyone the most.

Uranium market update

It has been almost five months since the Fukushima-Daiichi nuclear power plant was damaged by the devastating earthquake and tsunami in Japan. As Japan continues to manage the effects of these events on its nuclear reactor fleet, the future role of nuclear energy in that country is also being discussed. While there are reports of strong support for nuclear from various industry groups in Japan, public sentiment is reportedly more cautious.

Other countries around the world have now had time to do a preliminary review of their nuclear programs. With very few exceptions, we see these countries continuing their commitment to nuclear energy. India, China, France, Russia, South Korea, the United Kingdom, Canada, the United States, and almost every other country with a nuclear program are maintaining nuclear as a part of their energy mix.

There are a few exceptions, Germany being the most notable. Germany, which has 17 nuclear reactors, representing 5% of the global generating capacity, has decided to revert to its previous phase out policy. Currently, eight of its reactors (about 2% of global generating capacity) are shutdown; we do not expect these reactors to restart. Germany has indicated it plans to shut down the remaining nine reactors by 2022.

Despite these changes, the nuclear industry is growing. Other previously non-nuclear countries are considering adding nuclear to their energy programs in the future. Saudi Arabia, for example, recently announced its plan to build 16 reactors by 2030. Its plan includes building the first two reactors over the next 10 years and adding two new reactors every year thereafter. The Saudis are targeting nuclear power to provide 20% of their electricity needs in the future. Saudi Arabia has signed nuclear co-operation agreements with France and Argentina, and has announced plans to sign agreements with China and South Korea in the near future. We have not incorporated this announcement from Saudi Arabia into our supply and demand outlook below.

We have reviewed our supply and demand outlook from the first quarter and revised our estimates to reflect Germany’s decision to move away from nuclear and the current status of Japan’s nuclear fleet. As a result, we expect:

— over the next 10 years, world uranium demand to decline to about 2.1
billion pounds, compared to our previous estimate of 2.2 billion pounds
(about a 3% decline)
— in 2020, annual world consumption to decrease to about 225 million
pounds, about a 5 million pound reduction from our previous estimate.
This represents an average annual growth rate of about 3%.
— about 85 net new reactors by 2020 compared to our previous estimate of
about 90
— global uranium consumption in 2011 to decrease to about 175 million
pounds, a 3% reduction from our previous estimate of about 180 million
pounds
— global uranium production to be about 145 million pounds in 2011,
unchanged from our previous estimate
— world consumption of UF6 and UO2 conversion services to decrease to
about 65 million kgU in 2011 compared to our previous estimate of about
70 million kgU

Despite the expected decreases in our estimates noted above, we continue to expect annual global consumption to exceed annual global mine production by a significant margin over the next 10 years, a situation that has existed since about 1986. We expect the new supply required to meet global uranium demand to be about 270 million pounds over the next 10 years (our previous estimate was 320 million pounds).

About 70% of global uranium supply over the next 10 years is expected to come from mines currently in commercial operation, less than 20% is expected to come from existing secondary supply sources and the remainder is expected to come from new sources of supply (unchanged from our previous estimate).

With our extensive portfolio of long-term sales contracts, we are in the enviable position of being heavily committed until 2016. As a result, we expect the impact of changes in the global supply and demand outlook on us to be significantly less.

Despite this, the president/CEO went on to say that the slowdown in his company was not likely do to the uranium market, so much as cyclical factors; he believes the company will continue to perform within guidance.

SASKATOON, SASKATCHEWAN–(Marketwire -08/04/11)- ALL AMOUNTS ARE STATED IN CDN $ (UNLESS NOTED)

Cameco (TSX: CCO – News) (NYSE: CCJ – News) today reported its consolidated financial and operating results for the second quarter ended June 30, 2011 in accordance with International Financial Reporting Standards (IFRS).

“Through the second quarter of 2011 our operations demonstrated reliable production, keeping us on track for the year. At Cigar Lake, we continue to make significant progress,” said president and CEO Tim Gitzel. “We also made changes to Cameco’s management team to ensure we have the right mix of experience and energy to execute on our strategy to double annual uranium production by 2018.

“As we anticipated, this quarter’s financial results were lower due to variability in the timing of uranium deliveries. We expect our sales will be heavily weighted to the second half of the year and anticipate stronger results in the third and fourth quarters.

“With our extensive portfolio of long-term sales contracts, we are in the enviable position of being heavily committed until 2016, which provides us with financial stability as we pursue our corporate growth strategy.

“Over the longer term, we remain confident in the strong fundamentals of the uranium market. World demand for safe, clean, reliable, affordable energy continues to grow and the need for nuclear as part of the world’s energy mix remains as compelling as ever.”

VOORHEES, N.J.–(BUSINESS WIRE)– American Water Works Company, Inc. (NYSE:AWK – News), the largest publicly traded U.S. water and wastewater utility company, today reported results for the second quarter ended June 30, 2011. For the quarter, the company earned net income of $84.6 million and earnings per share of $0.48. Included in net income and earnings per share are $3.2 million and $0.02, respectively, related to the cessation of depreciation on assets under agreement for sale or sold in Arizona, New Mexico and Texas, classified as discontinued operations. Including the effect of depreciation expense related to these assets, adjusted net income for the second quarter 2011 was $81.4 million and adjusted earnings per share was $0.46 (non-GAAP financial measures). This is a more than 9.5 percent increase over the net income of $72.8 million and $0.42 per share in the comparable period in 2010.

“American Water’s continued execution of its strategies has resulted in another solid quarter,” said Jeff Sterba, president and CEO of American Water. “We increased revenues, net income and earnings per share. In addition, we are expanding our business in key states while improving our operating efficiency ratio. By driving operational excellence, we benefit our customers by providing reliable service at about a penny per gallon and investing needed dollars to maintain our pipes and plants.”

During the quarter, the company’s revenues increased 6.2 percent or $39.3 million quarter-over-quarter to $674.2 million. Operating expenses for the three months ended June 30, 2011, totaled $473.1 million, an increase of $26.5 million, or 5.9 percent, compared to the same period in 2010. Net cash provided by operating activities for the six months ended June 30, 2011, was $262.4 million compared to $297.5 million for the six months ended June 30, 2010. The decrease in cash flows was primarily driven by additional pension contributions and the receipt of a tax refund in the first half of 2010 that did not reoccur in 2011. The company’s capital expenditures for the six months ended June 30, 2011, were $391.8 million compared to $327.3 million for the same period in the prior year.

NEW YORK (CNNMoney) — Recent reports of an investigation by the Securities and Exchange Commission into whether shale gas companies are overstating their gas reserves highlights the challenges investors face in navigating this emerging sector.

Last week a research note from the investment management firm Robert W. Baird, citing industry lawyers, said the SEC is looking into whether shale gas companies may be overestimating the amount of natural gas they hold beneath the ground.

The investigation is most likely politically motivated and not entirely unwelcome, the note said, sparked by congressional calls for SEC action following a scathing report in the New York Times questioning the reserves held by some shale gas firms.

“We view it as appropriate and expected for the SEC to evaluate compliance with new regulations if compliance is publicly questioned,” Christine Tezak, an energy and environmental policy analyst at Baird, wrote in the note. “A regulatory investigation may provide a clearer investment horizon than a ‘trial’ in the press.”

The SEC would not confirm or deny if an investigation is underway.

CNN) — Syrian security forces on Wednesday cranked up a full-court press on the restive city of Hama, witnesses said, and the U.N. Security Council again planned to tackle the nearly five-months-long crisis in the volatile Arab land.

Citizens in Hama describe a fearful metropolis under siege by security forces amid a military offensive, according to the London-based Syrian Observatory for Human Rights, and witnesses said communications have been shut off amid the military push.

Along with its military operations, the government is dealing with the instability. Syria’s parliament, meanwhile, plans to meet on Sunday to discuss “issues related to the homeland and citizens’ interests,” the state-run Syrian Arab News Agency reported on Wednesday.

“There is a big, ongoing military operation,” said the observatory’s Rami Abdul-Rahman. His group monitors the unrest in Syria through many contacts on the ground, and his sources report hearing explosions and seeing plumes of smoke. “There are great concerns of a massacre in the city.”

“The human situation is very bad,” said an eyewitness from an opposition movement who said he is in the center of Hama and asked not to be named for security reasons. He said people are fearing 1982 again — a reference to a deadly government crackdown there a few decades ago.

There have been dozens of deaths in Hama and other Syrian cities in recent days, but there was no official word on Wednesday casualties.

However, corpses remained on the ground Wednesday after tanks occupied parts of central Hama amid heavy shelling, said a resident who fled the city — a bastion of anti-government sentiment and the site of massive demonstrations.

Residents said the city is lacking food. Power and water are scarce and residents said they fear a humanitarian crisis. Across Hama, intermittent gunfire and shelling rang out, helicopters whirled overhead and government snipers took positions, making it difficult for people to venture out, residents said.

BRUSSELS/ROME (Reuters) – The European Union voiced support for Italy and Spain under attack on financial markets but acknowledged that investors now doubt whether the euro zone can overcome its sovereign debt woes.

European Commission President Jose Manuel Barroso said a surge in Italian and Spanish bond yields to 14-year highs was cause for deep concern and did not reflect the true state of the third and fourth largest economies in the currency area.

“In fact, the tensions in bond markets reflect a growing concern among investors about the systemic capacity of the euro area to respond to the evolving crisis,” Barroso said in a statement.

He urged member states to speed up parliamentary approval of crisis-fighting measures agreed at a July 21 summit meant to stop contagion from Greece, Ireland and Portugal, which have received EU/IMF bailouts, to larger European economies.

But neither he nor European Monetary Affairs Commissioner Olli Rehn offered any immediate steps to stem the crisis, which has flared again with full force less than two weeks after that emergency meeting.

Italy has borne the brunt of a selloff triggered by the unresolved debt crisis and fears of a global economic slowdown. Its stocks and bonds gained some respite after a further early slump on Wednesday.

Italian Economy Minister Giulio Tremonti held two hours of emergency talks with the chairman of euro zone finance ministers, Jean-Claude Juncker, in Luxembourg but neither disclosed anything of substance after the meeting.

The European Commission said after Rehn spoke to Tremonti that Italy was “doing what is necessary to put the country back on track for higher sustainable growth and ensuring fiscal consolidation.”

A Commission spokeswoman said there had been no discussion of a bailout for Italy, which would overwhelm the bloc’s existing rescue funds.

The market turmoil caused alarm in some parts of Europe but apparent insouciance in the bloc’s biggest economy.

“Italian and Spanish bond yields rose to their new record highs. This is a very alarming and scary thing,” Finnish Prime Minister Jyrki Katainen told public broadcaster YLE. “The whole of Europe is in a very dangerous situation.”

Woah!

They think they have a credit rating agency…

I wonder if it’s called Stand & Pours? I wish the picture on the webpage was actually in front of one of those counterfeit McDonald’s. That would really add a twist to the story.

Beijing (CNN) — Although the United States narrowly avoided an unprecedented default following congressional approval of a last-minute compromise plan to raise the debt ceiling, China’s leading credit rating agency Wednesday downgraded U.S. sovereign debt after putting it on negative watch last month.

The Dagong Global Credit Rating Company, which lowered the United States to A+ last November after the U.S. Federal Reserve decided to continue loosening its monetary policy, announced a further downgrade to A, indicating heightened doubts over Washington’s long-term ability to repay its debts.

It said the gloomy assessment — much lower than the AAA ratings given by the so-called “big three” Western agencies Moody’s, Fitch, and Standard and Poor’s — was inevitable given the level of market concern generated by the stalemate between Democrats and Republicans over the debt ceiling.

“The squabbling between the two political parties on raising the U.S. debt ceiling reflected an irreversible trend on the United States’ declining ability to repay its debts,” Dagong Chairman Guan Jianzhong told CNN.

“The two parties acted in a very irresponsible way and their actions greatly exposed the negative impact of the U.S. political system on its economic fundamentals,” he said.

Ironically, Dagong’s move could hurt not just the United States but also China, the largest foreign owner of U.S. debt with holdings worth almost $1.2 trillion.

“Our downgrade simply reflects reality,” Guan said. “Our rating didn’t cause China to lose any money — it was the inappropriately high ratings for the U.S. by Western agencies that had led China to make risky investments in U.S. debt.”

Observers say China, whose foreign exchange reserves now stand at $3.2 trillion, has had little choice but to buy U.S. Treasury bonds.

“There aren’t that many other markets that are as deep or as liquid as treasuries,” said Patrick Chovanec, an economic analyst with Tsinghua University in Beijing. “When they accumulate reserves, this is the only place they can put them.”

The privately held Dagong, founded in 1994 to rate Chinese companies, attracted worldwide attention last July when it published its first sovereign credit ratings and, citing growing deficits in the developed world, ranked China higher than the United States and Japan.

Dagong now rates 67 countries and aims to more than double the number by the end of this year. Its ambition to become an alternative to the “big three” suffered a setback, however, when the U.S. Securities and Exchange Commission refused to recognize its rating because of the commission’s inability to supervise the Beijing-based agency.

Guan, who worked as a civil servant and a Wall Street accountant before taking the helm at Dagong, is quick to defend his firm’s independence and objectivity. He points to what he calls Western agencies’ “double standard” in rating the U.S. and European economies to underscore the global need for a newcomer like Dagong.

“People are used to credit ratings issued by the ‘big three,’ but the financial crisis has clearly proved them wrong,” Guan said. “They can no longer shoulder the responsibility of rating the world.”

“That’s the role we are striving to play,” he added.

NEW YORK (Reuters) – Pfizer Inc (NYSE:PFE – News) showed further weakness in its main business of prescription medicines, sending shares down more than 3 percent on concern over future growth as the company prepares to divest better-performing non-pharmaceuticals businesses.

The world’s largest drugmaker saw sales declines in primary care, specialty care, branded generic and oncology medicines during the second quarter. One of the few bright spots was that drug sales grew in emerging markets. (For a graphic on Pfizer’s earnings, see: http://r.reuters.com/vuf92s )

That could mean it is more vulnerable ahead of the U.S. patent expiration in November on its top-selling Lipitor cholesterol fighter. Generic competition has already begun to chip away at overseas sales of the $10 billion-a-year drug.

Pfizer said global prescription drug sales fell 3 percent in the quarter to $14.64 billion, and were down 7 percent after stripping out the benefit of the weaker dollar. Lipitor worldwide sales fell 8 percent to $2.59 billion.